Also known as: nonprobate assets · non-probate asset · non-probate assets · nonprobate property
Written by attorneys — see sources below.
A form of property ownership or transfer mechanism by which title or beneficial interest passes automatically to a designated survivor or beneficiary upon the owner's death without becoming part of the probate estate. Such assets include property held in tenancy by the entirety or joint tenancy with right of survivorship and contractual interests such as payable-on-death accounts or life insurance policies with named beneficiaries. A will has no effect on the disposition of these assets.
Norman Nash and his wife Nicole Navarro owned their farmhouse as tenants by the entirety. While divorce proceedings were pending Norman executed a will leaving the farm to his nephew Nolan Nunez. Norman died before any divorce decree or severance of the tenancy. Title to the farm passed directly to Nicole by operation of law.
David Egelhoff named his wife Donna as beneficiary of an ERISA-governed life insurance policy and pension plan. After their divorce David died without changing the designations. The children from his prior marriage claimed the proceeds under a state statute that revoked the designations upon divorce. The designations remained effective because ERISA preempted the state revocation rule.
Donna Rae Egelhoff was married to David A. Egelhoff. Mr. Egelhoff was employed by the Boeing Company, which provided him with a life insurance policy and a pension plan. Both plans were governed by ERISA, and Mr. Egelhoff designated his wife as the beneficiary under both. In April 1994, the Egelhoffs divorced. Just over two months later, Mr. Egelhoff died intestate following an automobile accident. At that time, Mrs. Egelhoff remained the listed beneficiary under both the life insurance policy and the pension plan. The life insurance proceeds, totaling $46,000, were paid to her. Respondents Samantha and David Egelhoff, Mr. Egelhoff's children by a previous marriage, are his statutory heirs under state law. They sued petitioner in Washington state court to recover the life insurance proceeds. In a separate action, respondents also sued to recover the pension plan benefits. The trial courts, concluding that both the insurance policy and the pension plan "should be administered in accordance" with ERISA, granted summary judgment to petitioner in both cases. The Washington Court of Appeals consolidated the cases and reversed. Applying the statute, it held that respondents were entitled to the proceeds of both the insurance policy and the pension plan. The Supreme Court of Washington affirmed. Courts have disagreed about whether statutes like that of Washington are pre-empted by ERISA. The Supreme Court granted certiorari to resolve the conflict.
View caseNo. A will cannot dispose of nonprobate property held as tenants by the entirety or in joint tenancy with right of survivorship. When the testator dies while still married and the tenancy remains intact title passes by operation of law to the surviving spouse.
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In states that augment the elective share the value of specified nonprobate assets is added to the probate estate before the elective-share fraction is applied. The augmented estate therefore includes both probate and certain nonprobate transfers made during the marriage.
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Yes. Both probate transfers and certain nonprobate transfers are included in the taxable estate for federal estate tax purposes. Liability for the tax is equitably apportioned among all recipients of includible assets unless the will provides otherwise.
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No. Filing for divorce does not by itself sever a tenancy by the entirety or revoke beneficiary designations on nonprobate assets. The tenancy or designation remains intact until a final decree or other legally effective act changes title or the beneficiary.
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…decree of dissolution or declaration of invalidity.” Wash. Rev. Code § 11.07.010(2)(a) (1994). That statute applies to “all nonprobate assets, wherever situated, held at the time of entry by a superior court of this state of a decree of dissolution of marriage or a declaration of invalidity.” § 11.07.010(1). It defines…